Samuel J. Arsht, Esq. – SBN 100156
Jeffrey A. Meinhardt, Esq. – SBN 245090
SILVER & ARSHT
1860 Bridgegate Street, Suite 100 Westlake Village, California 91361-1409
Phone: (805) 495-4044
Fax: (805) 494-4704
E-mail: sam@silverandarsht.com, imeinhardt@silverandarsht.com Attorneys for Plaintiff ALL SERVICE FINANCIAL, LLC.
IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE COUNTY 30-2022-01297683-CU-BC-CJC
ALL SERVICE FINANCIAL, LLC, a Florida limited liability company Plaintiff
vs.
THE LITIGATION PRACTICE GROUP, PC., Defendants.
Plaintiff ALL SERVICE FINANCIAL, LLC., a Florida limited liability company, hereby alleges:
GENERAL ALLEGATIONS (Against all Defendants)
1. Plaintiff ALL SERVICE FINANCIAL, LLC, a Florida limited liability company (“Plaintiff’ or “ASF”), is qualified to do business and is in good standing in California. ASF is a company that specializes in lead generation for consumers interested in debtor’s rights services.
2. Defendant BAT INC., is a California corporation, doing business as COAST PROCESSING (“BAT”), with its principal place of business located at 1351 Calle Avanzado, Suite 2 San Clemente, California 92673, in Orange County. Plaintiff is informed and believes and thereon alleges that BAT’s business is to provide administrative support services to law firms that provide a package of debtor’s rights services to the consumer.
3. Defendant THE LITIGATION PRACTICE GROUP, PC., is a California corporation (“LPG”), with its principal place of business located at 17542 E 17th Street, Ste 100 Tustin, California 92780, in Orange County. Plaintiff is informed and believes and thereon alleges that LPG’s business is to provide legal services to client seeking debtor’s rights services.
4. Plaintiff is informed and believes and thereon alleges that Defendant Tony Diab is the sole shareholder of BAT and resides in Orange County, California.
5. Plaintiff is informed and believes and thereon alleges that Defendant Daniel S. March is the sole shareholder of LPG and resides in Orange County, California. Defendants BAT, LPG, Daniel S. March and Tony Diab are collectively referred to herein as “BAT Defendants.”
6. Plaintiff is unaware of the names and capacities of the Defendants sued herein as Does 1 through 25 and therefore sues said Defendants by such fictitious names. Plaintiff will amend this Complaint to allege their true names and capacities when they become known. Plaintiff is informed and believes and thereon alleges that each of the fictitiously named Defendants is responsible in some manner for the damages suffered by Plaintiff as alleged in this Complaint.
GENERAL FACTS
7. On or about February 19, 2020, ASF and BAT entered into the written agreement titled, Amended and Restated BAT Inc. (dba Coast Processing) – Affiliate Agreement (the “Agreement”). A fully signed copy of the Agreement is attached hereto and incorporated herein as Exhibit “A”. Based on the terms of the Contract, for every “Account” ASF provided to BAT, BAT was to pay ASF a “Purchase Price.” The term “Account is defined as “each file generated by ASF and placed with Coast” and the term “Purchase Price” is defined as “69% of x (revenue produced per Account – y (Monthly Maintenance Fee).”
8. Plaintiff is informed and believes and thereon alleges that at some time after the execution of the Agreement, BAT assigned its rights in the Agreement to LPG, and/or LPG agreed to be bound by the terms of the Agreement. LPG’s agreement to the terms of the Agreement are evidenced by LPG’s conduct and acceptance of services provided by Plaintiff per the terms of the Agreement.
9. In or around November 2021, BAT Defendants stopped paying Plaintiff monies owed under the contract. Despite the continued monies received by BAT Defendants from the customers generated by ASF, BAT Defendants refused to pay ASF its Purchase Price on its account. In fact, LPG continued to send ASF regular updates on the amount of monies owed to ASF, which as of August 2022, was approximately $1.3 million. This amount has only increased over the last several months. BAT Defendants have failed to provide any valid reason for the withholding of these monies.
10. BAT, through its principal and alter ego, Tony Diab, has claimed that BAT is a defunct corporation with no assets. Plaintiff is informed and believes and thereon alleges that BAT has transferred all of its assets to LPG, in an attempt to make BAT judgment proof and to defraud its creditors, including ASF.
11. Plaintiff is informed and believes and thereon alleges that at all times herein mentioned there existed a unity of interest and ownership between BAT, LPG, Daniel S. March and Tony Diab and each of them, such that any individuality and separateness between them had ceased and the BAT Defendants and each of them, are the alter ego of each other and each is jointly and severally liable for damages suffered by ASF as a result of BAT Defendants’ breach of the Agreement.
12. Adherence to the fiction of the separate existence of BAT and LPG as entities distinct from the BAT Defendants, and each of them, would permit an abuse of the corporate privilege and promote injustice because, Plaintiff is informed, believes and thereon alleges:
(a) The BAT Defendants, and each of them, dominated and controlled BAT and LPG to such an extent that they controlled all of LPG’s and BAT’s assets, funds and payments;
(b) The BAT Defendants, and each of them, co-mingled funds with each other;
(c) BAT was and always remained undercapitalized and lacked the ability to pay its debts;
(d) At the time of incurring the underlying obligations to Plaintiff, BAT had insufficient capital or revenues to meet its obligations to Plaintiff;
(e) The BAT Defendants, and each of them, have used their own funds, whenever needed, to pay the obligations of BAT and/or LPG which they chose to pay;
(f) The BAT Defendants determined which BAT and LPG obligations would and would not be paid; and
(g) The BAT Defendants, and each of them, have dominated and controlled BAT and LPG to such an extent that they treat BAT and LPG and their assets the same as if directly owned by the BAT Defendants.
13. Based on the above facts, including the BAT Defendants’ controlling the finances and assets of BAT and LPG, not holding the BAT Defendants liable for BAT’s and LPG’s financial obligations as the alter ego of each other would permit an abuse of the corporate privilege and promote injustice because:
(a) BAT has transferred its assets to LPG in an attempt to undercapitalize so that it is unable to pay monies owed to ASF;
(b) Plaintiff believes but for the actions of the BAT Defendants to control the finances, assets and revenues of BAT, BAT would have been able to pay the monies owed to ASF; and
(c) based on the actions of the BAT Defendants, Plaintiff will never be able to collect the monies owed to ASF except from the BAT Defendants.
14. As the alter ego of BAT and LPG, the BAT Defendants, and each of them, are jointly and severally liable for the full amounted owed to Plaintiff.
15. Plaintiff is informed and believes and thereon alleges that LPG is the successor of BAT and has assumed the contractual obligations of BAT, including, but not limited to, the Agreement.
FIRST CAUSE OF ACTION
(Breach of Contract)
16. Cadre restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this First Cause of Action.
17. On or about February 19, 2020, ASF and BAT entered into the Agreement.
18. Some time thereafter, BAT allegedly ceased operations and assigned the Agreement to LPG. Through its words, actions, conduct and performance, LPG assumed the Agreement.
19. Plaintiff has performed all, or substantially all, of the material obligations required of it by the Agreement.
20. All conditions required for the BAT Defendants to perform under the Agreement have occurred.
21. Pursuant to the terms of the Agreement, the BAT Defendants owe Plaintiff an amount to be determined at the time of trial, but in no event less than $1.3 million as of the filing of the Complaint. BAT Defendants have failed to make payment to Plaintiff despite many requests for prompt payment.
22. Asa result of the BAT Defendants’ breach of the Agreement, Plaintiff is entitled to an amount to be proven at trial, reasonable attorney’s fees and costs incurred by Plaintiff as a result of the BAT Defendants’ breach of the Agreement, and pre-judgment interest at the rate provided by law.
SECOND CAUSE OF ACTION
(Open Book Account)
23. Plaintiff restates the allegations of paragraphs 1 through 15 against the BAT Defendant and DOES 1-25 and incorporates them into this Second Cause of Action.
24. Plaintiff and BAT Defendants engaged in a financial transaction in which Plaintiff provided leads for customers of legal services for debtors’ rights.
25. BAT Defendants accepted and profited off these leads by receiving payments from the customers generated by Plaintiffs leads.
26. Plaintiff and BAT Defendants kept an account of the debits and credits involved in the transaction and sent regular updates of the amount of Purchase Price owed to Plaintiff.
27. BAT Defendants owe Plaintiff in excess of $1.3 million on the account, as well as reasonable attorney’s fees, costs and pre-judgment interest at the rate provided by law.
THIRD CAUSE OF ACTION
(Account Stated)
28. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this Third Cause of Action.
29. BAT Defendants owe Plaintiff money from the aforementioned leads for customers generated by Plaintiff for the benefit of BAT Defendants.
30. Through telephone conferences and email correspondence, BAT Defendants have acknowledged amounts in excess of $1.3 million are owed to Plaintiff.
31. BAT Defendants have not paid Plaintiff the amount owed under the account and still owes Plaintiff over $1.3 million as well as pre-judgment interest at the rate provided by law. FOURTH CAUSE OF ACTION (Common Count-Goods and Services Rendered)
32. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this Fourth Cause of Action.
33. BAT Defendants requested, by words and/or conduct, that Plaintiff generate leads for customers requiring debtor’s rights legal services to BAT Defendants for BAT Defendants’ benefit.
34. Plaintiff performed the services requested by BAT Defendants.
35. BAT Defendants have not paid Plaintiff the full amount for the services it provided. The reasonable value of these services is in excess of $1.3 million plus pre-judgment interest at the rate provided by law.
FIFTH CAUSE OF ACTION
(Promissory Estoppel)
36. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this Fifth Cause of Action.
37. BAT Defendants promised to pay Plaintiff for leads generated for customers requiring debtor’s rights legal services and sent Plaintiff regular accountings of monies owed and paid such monies for some period of time.
38. Plaintiff relied on BAT Defendants’ promise to pay Plaintiff for its leads.
39. BAT Defendants have failed to pay Plaintiff monies owed for such leads.
40. Plaintiff has been injured by relying on BAT Defendants promise by not being able to sell leads to other companies which would have paid Plaintiff.
41. BAT Defendants have not paid Plaintiff the amount owed for the leads generated by Plaintiff and owes Plaintiff over $1.3 million as well as pre-judgment interest at the rate provided by law.
SIXTH CAUSE OF ACTION
(Quantum Meruit)
42. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this Sixth Cause of Action.
43. BAT Defendants requested, by words and/or conduct, that Plaintiff generate leads for customers requiring debtor’s rights legal services to BAT Defendants for BAT Defendants’ benefit.
44. It was understood by both BAT Defendants and Plaintiff that leads would be generated and provided to BAT Defendants to in exchange for a portion of the monies earned by Defendants from such leads. Ill
45. Plaintiff provide BAT Defendants with many generated leads that generated considerable income for BAT Defendants. BAT Defendants have failed to pay Plaintiff reasonable compensation for its services.
46. As a result of leads generated by Plaintiff, Plaintiff is entitled to reasonable compensation of no less than $1.3 million for its services, plus pre-judgment interest at the rate provided by law.
SEVENTH CAUSE OF ACTION
(Accounting)
47. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1-25 and incorporates them into this Seventh Cause of Action.
48. Plaintiff and BAT Defendants entered into the Agreement, which requires BAT Defendants to pay Plaintiff 69% of revenue produced by a lead generated provided by Plaintiff to BAT Defendants, which turned into a customer that purchased debtor’s rights legal services from BAT Defendants.
49. As of August 2022, BAT Defendants informed Plaintiff that Plaintiff was owed approximately $1.3 million on the accounts generated by Plaintiffs leads. Since then, BAT Defendants have failed to provide updated accountings of the monies owed to Plaintiff. Since Plaintiff does not currently have access to the amounts generated by the customers generated from its leads, Plaintiff cannot calculate the amounts owed to it and requires an accounting of all such amounts to determine the amount of Purchase Price owed to Plaintiff from BAT Defendants.
EIGHTH CAUSE OF ACTION
(Declaratory Relief)
50. Plaintiff restates the allegations of paragraphs 1 through 15 against BAT Defendants and DOES 1 -25 and incorporates them into this Eighth Cause of Action.
51. An actual controversy has arisen and now exists between Plaintiff on the one hand and BAT Defendants on the other hand. BAT Defendants contend that LPG does not have a contractual relationship with Plaintiff and is under no obligation to pay the Purchase Price to Plaintiff. Conversely, Plaintiff contends that LPG assumed the Agreement from BAT, is the alter ego of BAT and/or is the successor of BAT.
52. Additionally, Plaintiff contends that the BAT Defendants are all alter egos of each other. BAT Defendants contend that they are separate entities.
53. Plaintiff desires a judicial determination of its respective rights and duties and a declaration of LPG’s obligations as a party to the Agreement and a declaration regarding the alter ego status of the BAT Defendants amongst themselves.
54. A judicial declaration is necessary and appropriate at this time and under the circumstances in order to determine the LPG’s obligations in relation to the Agreement and the alter ego status of the BAT Defendants. This Court should order that LPG is a party to the Agreement and that the BAT Defendants are all alter egos of one another.
PRAYER FOR RELIEF
Plaintiff therefore prays for judgment against BAT Defendants as follows: ON THE FIRST, SECOND, THIRD, FOURTH, AND FIFTH CAUSES OF ACTION:
1. For compensatory damages in a sum according to proof, but in no event less than $1.3 million;
2. For interest at the legal rate;
3. For attorneys’ fees and costs of suit incurred herein; and
4. For other and further relief as the court may deem proper.
ON THE SIXTH CAUSE OF ACTION:
1. That judgment be rendered against the BAT Defendants for the reasonable value of the services rendered to BAT Defendants;
2. For costs of suit; and
3. For such other and further relief as the court deems proper.
ON THE SEVENTH CAUSE OF ACTION:
1. For a full and complete accounting of monies received by BAT Defendants from the leads generated by Plaintiff;
2. For a judgment in favor of Plaintiff and against BAT Defendants for the amount found to be due under that accounting; and
3. For such other and further relief as the court may deem just and proper.
ON THE EIGHTH CAUSE OF ACTION:
1. For declarations that LPG assumed the Agreement from BAT, that LPG is the alter ego of BAT and/or LPG is the successor of BAT;
2. For declarations that Tony Diab is the alter ego of BAT and the alter ego of LPG;
3. For declarations that Daniel March is the alter ego of BAT and the alter ego of LPG;
4. For compensatory damages in a sum according to proof, but in no event less than $1.3 million;
5. For pre-judgment interest on the amount of any judgment at the maximum amount allowed by law; and
6. For such other and further relief as the court may deem just and proper.
Dated: December 15, 2022
EXHIBIT “A”
Amended and Restated BAT Inc. (dba Coast Processing) – Affiliate Agreement This Amended and Restated Affiliate Agreement (this “Agreement”) is effective as of February 19, 2020 (the “Effective Date”), by and between All Services Financial, LLC, a Florida limited liability company (“ASF”) and BAT Inc. (dba Coast Processing), a California corporation (“Coast”, and together with ASF, the “Parties”).
WHEREAS, the Parties entered into a certain affiliate agreement on September 1, 2019 (the “Original Affiliate Agreement”), whereby Coast provides administrative support services to law firms that provide a package of debtor’s rights services to the consumer (the “Services”);
WHEREAS, ASF owns and operates a system of generating leads consisting of consumers interested in the Services (each, an “Account”), and Coast pays a fee to ASF for each Account, each as listed on Addendum 1 attached hereto;
WHEREAS, the Parties now desire to amend and restate the Original Affiliate Agreement, to allow, among other things, ASF to assign certain rights and obligations under this Agreement to Validation Partners Fund I LLC, a Delaware limited liability company.
NOW, THEREFORE, the Parties, intending to be legally bound, agree as follows:
Article 1. Definitions
“Account” means each file generated by ASF and placed with Coast, each as listed on Addendum 1.
“Active Account” means any Account for which Coast receives a payment from an Account Debtor within the last sixty days.
“Account Debtor” shall include any person liable on any Account, each as listed on Addendum 1.
“Confidential Information” means any information regarding contracts, customer or client lists or information, hardware, software, screens, specifications, designs, plans, drawings, data, prototypes, discoveries, research, developments, methods, processes, procedures, improvements, “know-how”, compilations, market research, marketing techniques and plans, marketing materials, business plans and strategies, documents, scripts, guidelines, price lists, pricing policies and financial information or other business and/or technical information and materials, in oral, demonstrative, written, graphic or machine- readable form, which is unpublished, not available to the general public or trade, and which is maintained as confidential and proprietary information by the disclosing party for regulatory, customer relations, and/or competitive reasons.
“Cure Period” is defined in Section 4.2.
“Monthly Maintenance Fee” means the administrative cost per Account of $91.38.
“NSF Fee” is defined in Section 2.2(b).
“Pro Rata Defense Fees” means the amount equal to 69% of all legal fees greater than $750, but less than $1,750, incurred by all counsel in the defense of an Account Debtor in court. “Purchase Price” means 69% of x (revenue produced per Account) -y (Monthly Maintenance Fee)
Article 2. Purchase of Accounts
2.1 Purchase Price and Manner of Payment. Coast shall pay ASF the Purchase Price, subject to any adjustments set forth in Section 2.2, pursuant to an agreed-upon schedule, not to exceed one remittance per seven days.
2.2 Adjustments.
(a) If any Account Debtor either, or both, (i) cancels the Services or (ii) demands a refund for payment for the Services, then ASF shall be responsible for returning the entirety of its fees collected on such Account to Coast. Coast has exclusive discretion to grant or deny an Account Debtor’s requested refund or cancellation. Coast shall be entitled to offset any future payments to ASF in order to recover the Account Debtor’s requested refund. Coast may treat an Account Debtor’s failure to remit payment in a timely manner as a cancellation of the Services, and has sole discretion to make such determination. Coast reserves all rights with regard to rejection of cancellation of an Account Debtor, but will do so only in accordance with the recommendation of the law firm utilized in providing such service, and subject to the applicable state bar rules for such representation.
(b) If, after an Account Debtor cancels the Services, Coast incurs a fee in connection with an Account Debtor’s “non-sufficient funds” charge (the “NSF Fee”), the NSF Fee shall be borne mutually between the Parties in the following amounts: 69% of the NSF Fee shall be borne by ASF, and 31% of the NSF Fee shall be borne by Coast.
(c) ASF shall be responsible for all Pro Rata Defense Fees, which amount shall be offset on a monthly basis from any fees due to ASF.
Article 3. Representations, Warranties, and Covenants
3.1 Marketing Materials. If requested by Coast, ASF shall provide a copy of all marketing materials used by ASF to Coast within ten business days of such request.
3.2 Confidentiality. ASF shall not use the name of Coast in any advertising, publicity release, or sales presentation designed to promote ASF’s service, unless Coast provides prior written consent to such use. Neither Party may disclose the Confidential Information of the other Party without the express consent of the other Party. If compelled by law, such Party shall promptly provide notice to the other Party, and the disclosing party will only disclose that portion of Confidential Information that is legally required to be disclosed and will use best efforts to ensure any such information so disclosed will be afforded confidential treatment. The disclosure of information in connection with a judicial proceeding shall not constitute a violation of this Section 3.2. The Parties agree to notify the other Party if any inadvertent disclosure of Confidential Information occurs, within two days of becoming aware of such disclosure. A Party whose Confidential Information is disclosed shall be entitled to injunctive relief. Failure to abide by this Section 3.2 shall entitle the Party whose Confidential Information was disclosed to a reasonable sum not less than $50,000.00, nor more than $200,000.00.
3.3 Compliance with Laws. Each Party shall comply with state and Federal laws in performing its obligations hereunder.
3.4 Costs and Expenses. Each Party shall be responsible for bearing its own costs and expenses incurred in performing its responsibilities under this Agreement, including all tariffs, filings, licensing or other fees.
3.5 Indemnity. Each Party shall indemnify and harmless each other, and their respective officers, directors, affiliates, shareholders, customers and employees from and against any and all liabilities, losses, damages and expenses (including legal expenses) of any kind or character arising from claims threatened or asserted and legal proceedings instituted in respect of (a) any breach of this Agreement by itself or its affiliates or (b) any act, omission or misrepresentation by any Party, including, without limitation, any claims related to the performance of the Services.
3.6 Disclaimer of Warranties. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OF ANY PATENTS OR THE NON- INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
Article 4. Term and Termination
4.1 Term. This Agreement shall continue for a period of 18 months from the Effective Date (the “Renewal Date”), and will automatically renew for an additional 18 month term unless terminated (i) as set forth in Section 4.2, or (ii) by either party upon 30 days written notice prior to the Renewal Date (such date, the “Termination”).
4.2 Default. If either Party fails to materially comply with any of the obligations in this Agreement, such defaulting party shall have thirty days from the date it receives notice of default from the non- defaulting Party to cure (the “Cure Period”). If the defaulting Party fails to cure within the Cure Period, the non-defaulting Party may terminate this Agreement at any time within the next 10 days upon written notice to the defaulting Party.
4.3. Obligations Following Termination. Upon Termination of this Agreement for any reason: (a) Coast and ASF shall refrain from making any disparaging or negative comment, remark, statement, or implication, whether written or oral about the other Party. (b) Coast shall pay all fees due to ASF until all Active Accounts have completed or withdrawn from the Services.
Article 5. Miscellaneous Provisions
5.1 Binding Effect of Agreement. This Agreement shall be binding on and inure to the benefit of the Parties and their respective heirs, successors, representatives, and assigns.
5.2 Assignment. The rights and obligations under this Agreement, including any rights to current or future receivables, shall be fully assignable by ASF to any third party and if assigned by ASF to any third party, such third party shall be an intended third party beneficiary of this Agreement with full rights to enforce any rights assigned to it by ASF, as if such third party is ASF under this Agreement.
5.3 Governing Law; Submission to Jurisdiction. The validity, interpretation, enforcement, and effect of this Agreement shall be governed by the laws of the State of California. Coast and ASF hereby consent to the jurisdiction of all state and Federal courts in California.
5.4 Entire Agreement; Severability. This Agreement contains the entire agreement between the Parties respecting the matters herein set forth and supersedes all prior agreements, whether written or oral, between the Parties respecting such matters. Any amendments or modifications hereto, in order to be effective, shall be in writing and executed by the Parties hereto. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to any other persons or circumstances.
5.5 Attorneys’ Fees. If a dispute between the Parties arises out of this Agreement, the prevailing party of such dispute will be entitled to recover from the non-prevailing party, any and all costs and expenses, including, without limitation, collection costs, reasonable attorneys’ fees and appeal costs, incurred by the prevailing party.
5.6 Effect of Headings. Headings of articles and paragraphs in this Agreement shall not have any legal effect but are provided only to facilitate the reading of the text.
BAT Inc. (dba Coast Processing) Name: Brian Reale Title: Chief Executive Officer
All Services Financial, LLC Name: Bonnie Silver Title: Chief Executive Officer
